The first proposal would pay out the $350 million from the state’s tobacco settlement fund over 20 years.

Another option is to pay Detroit up front. An immediate lump sum payment would cost less overall – one estimate suggests about $200 million. But it would require the state to issue bonds, and probably use tobacco settlement revenues to back them up.

Michigan State University economist Eric Scorsone said Gov. Snyder had been waiting for Detroit’s pension funds to settle with the city.

Now that they’ve reached tentative deals, the focus turns to state lawmakers.

“We’ll see now if the legislature is willing to step forward,” Scorsone said. “Obviously, the governor will probably be putting quite a bit of pressure on them to do that.”

Snyder has said he wants lawmakers to vote on the aid package before they leave for summer break.

Some Republican lawmakers have expressed strong skepticism about providing Detroit with any kind of aid package. But without state support, the grand bargain concept would fall apart, endangering both the DIA and the whole bankruptcy process.

Wayne State University bankruptcy law professor Laura Bartell said the ball is now firmly in the state’s court.

Now that Detroit’s pension funds have come to the table, “That does create a strong impetus for Lansing to get its act together,” Bartell said.

Related Content

Mediators for the federal court overseeing Detroit's Chapter 9 bankruptcy say a deal has been reached between the city of Detroit and the Retired Detroit Police and Fire Fighters Association over pension and health benefits.

The deal calls for no cuts to current pension benefits, but does cut future "cost of living" increases in their benefits.

The Association's members still need to approve the plan through a vote.

The potential deal is the first agreement the city has reached with a group of retired workers.

As Detroit continues to move through the bankruptcy process, an outstanding issue is a plan to protect artwork at the Detroit Institute of Arts. A group of foundations and private donors have pledged over $300 million that would help cover city pensions and offset the need to sell the artwork.

A recent op-ed in the Chronicle of Philanthropy questions the wisdom of this plan. William Schambra is the director of the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal in Washington D.C. and he joined us today.